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Traders work on the floor at the Dubai Financial Market at Dubai World Trade Centre. Sarah Dea / The National
Traders work on the floor at the Dubai Financial Market at Dubai World Trade Centre. Sarah Dea / The National

UAE lauded for protecting minority investors

The UAE has done more to protect minority investors in the past year than any other nation, according to the Doing Business 2014 report, conducted jointly by the World Bank and IFC.

The UAE has done more to protect minority investors in the past year than any other nation, according to the Doing Business 2014 report.

It helped the UAE to jump three notches to 23 in the ranking for the report, conducted jointly by the World Bank and IFC, which assesses how easy it is for small and medium enterprises to do business in 189 nations across the world.

The Emirates was once again the highest-rated Arab nation in the annual report, followed by Saudi Arabia in 26th spot. Singapore was deemed the most business-friendly country, topping the ranking.

“The UAE was the economy improving minority shareholder protections the most in 2012-13,” according to the report, which considers 11 other factors including ease of getting credit and the time taken to settle insolvencies.

The report referenced a ministerial decree of August last year, which required companies to include in their annual financial statements detailed information on deals during the past year involving parties closely linked to the company through family or business ties.

No such disclosure obligation previously existed, it said. The same decree also entitles any shareholder of a company to file a petition in court seeking to suspend deals done in breach of the law.

Despite the improvements, the UAE still ranked 98th in the level of protection it gave investors.

Risks to minority shareholders from wrongful business dealings were highlighted globally in late 2011 after the Japanese optical equipment maker Olympus admitted to overpaying for goods and services bought from related parties. Shareholders filed a lawsuit last year, seeking US$240 million in compensation for the resulting losses on their investments.

In other areas, the report said the UAE had also made it easier for businesses to get electricity by improving the efficiency process. It ranked fourth overall in the ease of getting electricity index. The country also made registering property easier, allowing it to score fourth in that index.

Following criticism from China and an independent review about the rankings within the survey in previous reports, the World Bank revised this year’s study. It retained the controversial rankings but toned down some of the negative commentary about poorly performing nations. Instead, it opted to focus more on where nations are making progress in reform.

For the first time, Libya, South Sudan and Myanmar were included in this year’s survey. All three were found to have old and archaic business regulations, with the civil code and civil and commercial procedure codes all dating back to 1953 in Libya. However, since independence in 2011, South Sudan had passed a company law, insolvency law and tax law, the report noted.

Given the level of civil strife in Syria, the country was unsurprisingly deemed to have suffered the biggest deterioration in business rules in the past year.

“The time and cost associated with trading across borders increased substantially, for example, and no building permits are being issued in Damascus, making it impossible to legally build new construction,” the report noted.

The UAE and other GCC nations have long supported the Doing Business surveys, often using them as benchmark for where they need to make reforms.

tarnold@thenational.ae

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